Trading Plan for 4/4

Tuesday morning’s chance to… retest Monday’s highs was undermined by the same sort of problem that created Monday’s unfinished business — an unfulfilled bias-up target. Tuesday’s was not required, so a recovery now could be that much more powerful.

Pattern points… (Setups and technicals)[pay]
Tuesday’s FOMC reaction from 1409.50 down to 1400.50 reacted up to 1405.00. Its retest was expected to be an “inflection point,” either plummeting lower or else reacting much more sharply. And its retest was allowed room down to 1399.75.

1399.75‘s test did react more sharply, to 1406.50 and then to 1409.00. The entire FOMC-plunge was retraced. But that wasn’t enough.

Just as 1410.00 needed to hold Tuesday’s open to maintain potential to retest Monday’s highs, closing Tuesday under 1410.00 has made the market vulnerable to trending down Wednesday. By the same token, gapping open Wednesday back above 1410.00 would reinstate potential to retest Monday’s highs.

And not just above 1410.00, but above 1412.50 — at least through the opening 15 minutes of volatility. Buyers did not gain traction for their late effort, so they can extend higher Wednesday only by gapping up.

Initial weakness Wednesday would have room down to 1403.50-1405.00 before gaining traction for a more substantial decline, and preventing a recovery attempt from being productive.

[/pay]What’s Next… (Outlook and opportunities)[pay]
The three-day holiday indicator may trigger at Wednesday’s close. If it does trigger, its impact is likely to be immediate since Friday is a holiday.[/pay]

Look for at least one update overnight or ahead of the Morning Market Tour… My thoughts on the day’s econ calendar are linked here.